Question 1

The ___________-________ point is the sales volume at which revenues and total costs are equal.

Accepted Answer

The answer of The ___________-________ point is the sales volume...

Question 2

The r___________ range is the range of activity within which a firm normally operates.

Accepted Answer

The answer of The r___________ range is the range of...

Question 3

Product X sells for $20 per unit and has a contribution margin rate of 40 percent.Fixed expenses total $120 000 annually.How many units of Product X must be sold to yield a profit of $30 000?

Accepted Answer

First, we need to calculate the contribution margin per unit:
$20 x 40% = $8
Next, we need to calculate the break-even point:
$120 000 / $8 = 15 000 units
To calculate the units needed to yield a profit of $30 000, we use the following formula:
(units x contribution margin) - fixed expenses = profit
(units x $8) - $120 000 = $30 000
units x $8 = $150 000
units = 18 750 units.

Therefore, the best choice is B, as we need to sell 18,750 units to yield a profit of $30,000.

Question 4

If all other factors remain the same a 20% increase in both the selling price and variable costs of a product will:

Accepted Answer

The answer of If all other factors remain the same...

Question 5

Which statement relating to margin of safety is not true?

Accepted Answer

Margin of safety is the excess of expected sales over the break-even point, not the excess of actual sales over expected sales.

Question 6

An important aspect of CVP analysis is that all cost functions are assumed to be l_____________.

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The answer of An important aspect of CVP analysis is...

Question 7

The following information is available for Adam Ltd $\begin{array}{|l|r|r|r|}
\hline &{\text { Budget }} &{\text { Actual }} &{\text { Variance }} \
\hline \text { Sales units } & 7,500 & 8,000 & 500 \mathrm{~F} \
\hline \text { Sales dollars } & \$ 375,000 & \$ 376,000 & \$ 1000 \mathrm{~F} \
\hline \text { Variable Expenses } & \$ 262,500 & \$ 296,000 & \$ 33,500 \mathrm{U} \
\hline \text { Contribution margin } & \$ 112,500 & \$ 80,000 & \$ 35,000 \mathrm{U} \
\hline
\end{array}$ The variable expense variance is:

Accepted Answer

The answer of The following information is available for Adam...

Question 8

Which of these would cause the break-even point to change?

Accepted Answer

An increase in fixed costs would change the break-even point because it affects the total costs that need to be covered by sales revenue.

Question 9

Apex Company has the following cost estimates: variable cost per unit is $9,total fixed costs are $58,000 and the projected sales price is $13 each.The new accountant suggests that fixed costs can be reduced by $8,000.If so,how many units must be sold to produce a profit of $65,000?

Accepted Answer

The answer of Apex Company has the following cost estimates:...

Question 10

A m__________ cost contains both fixed and variable components.

Accepted Answer

The answer of A m__________ cost contains both fixed and...

Question 11

The horizontal axis of the cost-volume-profit chart represents u_________.

Accepted Answer

The answer of The horizontal axis of the cost-volume-profit chart...

Question 12

Gail Co sells a single product for $40 per unit.Fixed costs are $160 000 and variable costs equal 75% of sales.If fixed costs increase by $10 000,Gail will have to increase sales by how much just to earn profits equal to those earned before costs increased?

Accepted Answer

First, let's find the current profit by using the contribution margin approach:
Selling price = $40
Variable cost = 75% x $40 = $30
Contribution margin = $40 - $30 = $10
Total profit = Sales x Contribution margin - Fixed cost
At breakeven, profit is zero, so:
0 = Sales x $10 - $160,000
Sales = $16,0000 / $10 = 16,000
Now, let's calculate the new breakeven point:
New fixed cost = $160,000 + $10,000 = $170,000
0 = Sales x $10 - $170,000
Sales = $170,000 / $10 = 17,000
The increase in sales needed to earn the same profit as before is:

17,000 - 16,000 = $1,0000 or Choice B) $40,000

Therefore, the correct choice is B) $40,000.

Question 13

AAA Farming can sell 10 000 units of a product for which the variable expenses are $3 per unit.Fixed expenses are $20 000 and the farmer wishes to earn a profit of $20 000.What price must AAA charge?

Accepted Answer

First, we need to calculate the total cost:
Total cost = Variable expenses + Fixed expenses + Desired profit
Total cost = ($3 per unit x 10 000 units) + $20 000 + $20 000
Total cost = $30 000 + $20 000 + $20 000
Total cost = $70 000

Then, we can calculate the price per unit needed to achieve this total cost:
Price per unit = Total cost / Number of units
Price per unit = $70 000 / 10 000 units
Price per unit = $7 per unit

Therefore, AAA Farming must charge $7 per unit to sell 10 000 units of the product and earn a profit of $20 000.

Question 14

The c________________ m_____________ is equal to sales revenue less variable costs.

Accepted Answer

The answer of The c________________ m_____________ is equal to sales...

Question 15

What will be the effect on the breakeven point if advertising is increased?

Accepted Answer

Increasing advertising expenses will raise the total fixed costs. Since the breakeven point is calculated based on both fixed costs and variable costs per unit, an increase in fixed costs (with all else being constant) will result in a higher breakeven point. This means more units must be sold to cover the increased costs.

Question 16

Beachcomber Ltd produces and sells two models of surf boards: $$\begin{array} { l c c } 
& \text { Standard } & \text { Super } \
\text { Selling price } & \$ 100 & \$ 280 \
\text { Variable costs } & 80 & 140
\end{array}$$ Total fixed costs are $180 000 and the company sells 5 Standards models for every Super model.What quantity of the Super model will be sold at break-even point?

Accepted Answer

To find the break-even point, calculate the contribution margin for each model: Standard = $20, Super = $140. The sales mix is 5:1, so for every 6 boards, 5 are Standard and 1 is Super. The weighted average contribution margin is $(5 \times 20 + 1 \times 140) / 6 = 40$. Break-even point in units = Total fixed costs / Weighted average contribution margin = 180,000 / 40 = 4500 units. Since 1 out of every 6 boards is a Super, the quantity of Super models sold is 4500 / 6 = 750.

Question 17

The budgeted sales price multiplied by the difference between the actual and budgeted number of units sold is which variance?

Accepted Answer

The sales volume variance is calculated by taking the budgeted sales price and multiplying it by the difference between the actual and budgeted number of units sold.

Question 18

A change in which of these would not affect the break-even point?

Accepted Answer

The break-even point is determined by fixed costs, variable costs per unit, and the sales price per unit. The number of units sold does not affect the break-even point itself; it is the outcome of reaching the break-even point, not a factor in its calculation.

Question 19

The contribution margin approach to the income statement makes a primary classification of expenses according to cost b_________.

Accepted Answer

The answer of The contribution margin approach to the income...

Question 20

The difference between actual and planned results is known as a v__________.

Accepted Answer

The answer of The difference between actual and planned results...

Quiz 11: Cost-Volume-Profit Analysis for Decision Making

The ___- point is the sales volume at which revenues and total costs are equal.